Case Study - Trident in the Road - somewhat qualitative and speculative.

[9ft5wt]

Greetings,

Some background - My wife and I currently teach at an international school in Africa and are able to now save about $45,000 a year in taxable accounts. We're both 31 years old, no kids. We're moving back to the East Coast of the US and have three main options detailed below and are wondering if any of you can offer insight into which might be the best financial decision for us.

The Trident in the Road - New York City private schools vs Baltimore City/County public schools vs middle-of-nowhere PA boarding school.

Income & Benefits
NYC: $130,000 combined, tax-deferred savings with no match. Exceptional health insurance with dental, vision and life.

Baltimore: $110,000 combined, tax-deferred savings with no match. Exceptional health insurance with dental, vision and life.

PA Boarding: $83,000 combined. housing, utilities and 3 square meals a day are fully provided, 5% match in TIAA tax deferred account. Exceptional health insurance with dental, vision and life.

Expenses:
NYC: super high rent, utilities, plan to live Mustachianly for everything else. State/City Tax are high. Metro card.

Baltimore: We would purchase a house in the city in the $150,000 range, State/City/Property taxes are relatively high. One of us would commute from the city to the county.

PA Boarding: ... not much. Internet, some food/beverages. Traveling during breaks. No commute.

Intangibles:
NYC
Pros: It's NYC. Private school teaching environment would be very similar to the environment we're currently in. Opportunity to tutor to earn extra cash. Lots of free stuff to do.
Cons: No house to build equity and have during retirement years. Savings potential may be high, but depends on a lot of unknowns.

Baltimore -
Pros: Have lived and taught in this city for two years previously. That said, the teaching environment is super challenging but highly rewarding. Low COL. Friends remain in the area. We could buy a house and build some equity, pay it off relatively quickly and have it during our retirement years.
Cons: The teaching environment is super challenging, the number of hoops we have to jump through to legally teach in the public schools after being abroad for 6 years is insanely daunting, confusing and frustrating. That process alone is almost enough to preclude this option. Savings potential is high, but depends on a lot of unknowns.

PA Boarding:
Pros: It's closest to our families, which is the main reason we're repatriating. Excellent school, great facilities, relatively low stress teaching environment. It seems like we'd be able to stash the vast majority of our salaries. Shorter teaching year with very long holiday and seasonal breaks.
Cons: It's in the middle-of-nowhere rural PA. We must be on duty 1 weekend a month, and the days are longer than traditional schools.

Assets: $135,000
$75,000 in Vanguard Index Funds
$60,000 in cash earmarked for down payment and closing costs, possibly a Master's degree for my wife.

Debt: $6000
$6000 student loan at 4.8%

It seems as though our choice comes down to either living in NYC and maybe saving a little bit of money, living in Baltimore, buying a house and saving a little bit of money, or living in bumblef@*k, PA and saving a large sum of money.

We want to retire in 14 years at 45. Obviously, having a paid-off house makes that much easier.

What would you do?

[Roots&Wings]

PA sounds incredible. Is it honestly in the middle of nowhere? At least you'd have clean air and outdoors/hiking :)

But your attitude towards it seems the least enthusiastic. Where will you be happiest? Which is best aligned with your goals (both short and long term)?

Sounds like you could save the most in PA, and shave off many working years.

[Capsu78]

You have not said where in PA, but as someone who grew up there, trust me, there are many "middle of nowhere's" there.
And on a side obscure trivia point- it is said that when William Penn sent someone over the pond to take a look around at his new property, the scout reported back that a squirrel could climb a tree at the Delaware river and cross from tree to tree all the way to the Ohio frontier without ever touching the ground.

Back to the OP, your choices are also mega urban, urban vs rural so that trident has very different tips beyond just financial considerations. 

[justajane]

It's hard for any of us to answer this question, since this is much more than a financial decision. I personally would choose Pennsylvania, but that's because I have kids and think it sounds like a good place to raise kids. Also, if you decide to have kids, it will be nice to be so close to family, and you have already said that's one reason you are moving in the first place.

Having said that, if you are bored all the time, you might not be happy. What are your hobbies like? Are they things that can be satisfied only by an urban environment? How close would you be in PA to a large city? Maybe you could regularly go there for concerts or week-ends away? If you are saving more money there, this might be a financial possibility.

You don't sound like you are that thrilled by the prospect of a public school.

[MrsPete]

Very different choices.  Speaking only for myself, I'd rank them in this order:

1.  The rural PA boarding school.  Closer to family -- good, shorter year -- more time for travel, less stress in the job.  I assume you'd live in the boarding school?  As such, you'd need to put away money specifically towards a house you'd buy eventually. 

Well, I was ready to rank them, but both of the others seem rather unappealing -- and for different reasons. 

The NYC job is, well, in NYC.  No thanks.  A nice place to visit, but I would never, ever want to live in that too-busy place.  So, for personal reasons, I wouldn't want that job. 

And from the way you describe the Baltimore location, I'm thinking it's one of those dangerous, no-one-cares-about-helping-you-but-you'd-better-produce-results inner city type of schools.  Since you are not staring in a made-for-TV movie, you are not likely to find a way to motivate downtrodden heart-of-gold inner city kids and overcome their awful upbringing, so it'd be a burnout job. 

I can't choose between the other two.

[Mustafa413]

As someone in a similar situation (except for way more loan debt), I chose the boarding school in the middle of nowhere. Moving in 3 months.

But as others have said, it's up to your personal tastes. My wife and I are excited about living in a clean, non-urban environment...both for our son and because we love having easy access to free activities beyond walking around the suburbs or local city/county parks that are basically just glorified playgrounds. Not that this lifestyle is horrible, but we're excited to get out of here and start a new phase of life.

Also, if you're planning to have kids I imagine PA would be the best long-term choice. If not, it still seems to me like the best case scenario for retirement. You can always use some of your income to purchase a house and rent it out. Or save it for a cash purchase?

Also, hard to beat that commute.

My wife and I are hoping to do what I described once we've figured out/solved our student loan situation. But sounds like you guys are in better shape than us already!

Good luck!

[9ft5wt]

Thanks guys! 

For the past few months, we were leaning towards Baltimore because of our history there, our friends, all of the great food and music and the low cost of living compared to a city teacher's salary. There are some very interesting charter schools that we've been interviewing with that are working through whole-school reform and offering wrap-around services for the community. It would be very tough but it's a great opportunity to be a part of something special. When I worked there previously, in a non-charter neighborhood school, I described my day-to-day experience as 'soul destroying'. Moving back this 2nd time is contingent upon finding employment in a very organized and established school with a strong leader and systems in place, to keep my soul intact.

Once we found out the salary information for the boarding school, it immediately shot up towards the top of our list. We'd each get $1500 signing bonuses. I'd be somewhere around 40k with 9 years experience and a Masters degree, and my wife would be somewhere near 38k with 10 years and a bachelors, but all food, housing, utilities, healthcare, 5% pension match is included. They also mentioned they have room to negotiate, so we can maybe push that a bit higher. This school is in a rural small town, about 500 meters from a state park that offers mountain biking/running trails and fly fishing, which are our hobbies.

NYC appeals to us because it is the capital of western civilization. It would be a stark contrast from living in a chaotic and struggling African city, with absolutely no services, for the past three years.

Three extremely different choices. The PA boarding school option is the best financial decision but would also be sort of weird to live on campus and be accessible to your students for much of the day. I'm not sure if I'd be able to embrace that or if I would grow to resent it. I think the shorter year and longer breaks would prevent some resentment, probably.

So the consensus seems to be that hoarding straight cash (boarding option) is a better deal than purchasing a house and saving some money (Baltimore option), even though the equity we build on the house plus the savings might equal the amount of cash we can stash?

[justajane]

You don't tend to build much equity in a house for years. Are you talking about staying in this home for the rest of your life? Have you been a homeowner before? They can and often are more expensive than you anticipate. I would make the decision based on where you want to live, not on the idea of homeownership. In PA, you don't have any housing expenses, which is frankly ideal for FIRE.

In a job in which you could save more cash for taxable investments, you could eventually buy a retirement home in cash in a LCOL area and come out much farther ahead.

Also, what about the charter school? Would you job  be secure or is this an institution that could fold in five years like other charter schools have done?

It sounds like you don't want to live in PA. This is perfectly valid. Life is more important than money.

[9ft5wt]

Thanks for the advice.

The three choices are so different it makes it very difficult to compare them directly. It's like asking which you like better: a nice filet or a delicious bowl of ice cream?  IMPOSSIBLE.

We're fairly certain that we would find happiness in all three places. This boils the choices down a bit.

Do we want to live in NYC now before we have kids, and maybe extend our FIRE date a few years?

Do we want to hoard straight cash, maybe 50k a year?

Do we want to buy a house and save a bit of money?

IMPOSSIBLE... but I'm leaning towards hoarding straight cash. As Jane says, if we saved enough cash to purchase a house outright, we would come out ahead in the long run.

[nycstash]

So, I just want to chime in with a somewhat different perspective.  $130K is a LOT of money, even in NYC.  The difference between $83K and $130K is very large, even when factoring in free room and board.  NYC can be a ridiculously expensive city but it doesn't have to be - especially for a childless couple. My guess is that you could live in NYC in a fairly mustachian way and enjoy a much happier standard of living - IF you are excited about being in an urban environment.  For perspective, here is my imaginary budget for you guys:

Income: $130K
Tax Free Contributions to your Retirement Account: 36K (the max)
Taxable Income:  $94K

Monthly Net Income After Taxes:  $5900

Expenses:
Rent will be your absolutely biggest expense so you would have to make some choices there on what you want. If you live in Brooklyn, Queens or Uptown Manhattan (Inwood, Washington Heights or Harlem), then you can easily get a 1BR for under $2,000.  Probably less, for sure less if you get a place in a neighborhood similar to where you'd live in Baltimore, but definitely $2,000.  I'm going to go with that, but there is room in this hypothetical budget if you decided you wanted total luxury and went up to $2,500.

Rent: 2,000
Con Ed: 70
High Speed Internet: 65
Monthly Metro Cards: 230 (work might have a tax deductible plan for this)
Netflix: 8
Groceries: 400
Eating Out: 200 (super nice meal every other week or modest meal every week - of course you can cut this)
Entertainment: 400 (splurge night out once/week, in addition to eating out, plus some more modest things)
Personal Spending: 400 (NYC can be expensive so this is extra money split between you)

This comes in at $3,773.

Left: Approximately $2,100. 

I figure that half of that $2,000 can go into a fund for travel, clothes, gifts and one-off expenses, which gives you $12,050/year to play with. The other half can go into some kind of savings vehicle for a total of $12,050/year.

Even with a very generous budget (which this is; almost all these amounts are much higher than my personal budget), you could end up saving $48K/year.  By way of comparison, my partner and I have two kids, our paying for braces ($4k) this year, pay $500/month in student loans, own a car (crazy expensive and unnecessary thing to do but worth it to us), have close to $5K in childcare expenses and our monthly expenses (including all annualized expenses) is right around $6K.  If you are willing to cut back your spending at all, you can likely save way more than this, but I went with high end estimates just to challenge the assumption that living in NYC means you can't save money.

I'm not sure what your emotional preferences are, but I will say that I think NYC is a pretty amazing place and sounds like within range of your friends and family.  It can be really expensive here, but if you do your food shopping at Trader Joe's you can keep your grocery costs down.   There are so many fantastic and interesting restaurants with world-class food at prices you can't get anywhere else - e.g., an amazing Schezuan meal in Flushing will run you $20-$30 for two with drinks and is a great experience.  Just walking around the city, especially if you've never lived here, is exciting and energizing in itself.  The parks are phenomenal.  There are more free events and activities than you can imagine: free outdoor movies all summer; Shakespeare in the Park; donation-only museums; free kayaking in summer; free concerts; literary events; etc. As a teacher, you can join TDF and get 1/2 price tickets to theater.  I think it would be a hard place to early retire, but I think it would be a great place to spend your thirties and earn money and save.  If you lived here for 10 years, you could probably save $360K in your retirement account, another $120K in a taxable account, plus your current $135K for a total of $615K before any investment growth or raises (and I assume you'll get raises).  With that you could buy a home outright, or almost outright, a house in Baltimore or somewhere lower cost of living where you want to retire.

I have no idea if that's what you want lifestyle-wise, but just wanted to say that NYC should be in the running if it's appealing to you.  If you want to have kids, then that calculus changes a bit as childcare is insane in NYC.

[cynthia1848]

I would absolutely pick the place in PA.  COL in NYC is *insane* - everything is more expensive there.  I would also put Baltimore above NYC for the COL alone.  Look at the complete tax burden.  Look at the cost of food, rent, and everything else.

FWIW, I have friends who work as teachers and "resident mothers" for boarding schools and to a person they LOVE it.  The community does tend to be based around the school, but that is a plus for them as well.

[justajane]

I had a similar choice in my twenties - where I was going to go to graduate school. Finances were minor compared to this overwhelming sense that whatever decision I made would shape the rest of my life. I ended up coming to the conclusion that whatever decision I made was going to be the "right" decision. In essence, I was choosing between three right life paths. You are in the same position.

I chose an unconventional decision that surprised many (i.e. turned down the highest ranked and most prestigious graduate school), but I am still happy with my decision 15 years later.

My best advice to you would be to relish the position you are in, i.e. don't give it too much crushing weight that you feel paralyzed or nervous about making the "wrong" decision. You can't go wrong here.

[ShoulderThingThatGoesUp]

PA is weird in that even when you're in the middle of nowhere you're usually not that far from a substantial town with a hospital, grocery store, etc. I would pick PA but that's because I can't stand NYC and it sounds like Baltimore might string you along for a while with bureaucracy before you even got to work.

[charis]

I would be very careful about hitching your wagon to a charter school.

[teacherwithamustache]

I would be very careful about hitching your wagon to a charter school.

Charter Schools are the devil for the teacher.  They expect you to work all sorts of crazy hours and to go thru all sorts of modifications and then they blame you again when it does not work out.  If you live in a crappy neighborhood I would send my kid to a charter school.  I would never work at one.  Charter schools want to recruit the 22 year old liberal arts major who has no idea what they want to do with their life but they have 60k in loan debt and no idea where they want to go to grad school.  No family No life, but they want to make a difference.  They put them in a charter school and work them like a gov mule for 5 years.  Then they get their student loans paid for by Uncle Sam.

Do not under estimate how much coin you can bring in doing SAT tutoring and college essay review tutoring in NYC.  In Houston I make 25k a year doing it part time about 20 hours a month.  I literally turn down business on a regular basis.  Tutors in NYC will easily make 100K + in a year with a bit of hustle and not being a super dork.

What subjects do the 2 of you teach?  You could move to Houston and make a lot more money tutoring, lower cost of living, and make 65k a year each teaching easy.

The real benefit to teaching is the pension.  With both of you wanting to retire early I dont see the pension benefits being right for you.  Make sure and look at how the state lets you roll over your pensions every year.

I would choose Pennsylvania Boarding School

[magnuminator]

I'm not sure how invested you are in your hobbies, but if you like trail running, mountain biking, and fly fishing I would think that alone should rule out NYC and perhaps Baltimore as well.  I'm sure New York has some kind of free public "nature" activities but if you've experienced the real thing those may be poor substitutes.

Of course we're all latching on to the parts of your posts that resonate with us.  I love the mountains and NYC would be way to densely populated for my tastes, but you may be perfectly happy hanging up your fly rod and shoes and going to a film screening or poetry reading instead.  You'll have to decide that for yourselves.

(If it's not clear, I vote: PA, then MD, and NY last.)

[ohana]

I would be very careful about hitching your wagon to a charter school.

Charter Schools are the devil for the teacher.  They expect you to work all sorts of crazy hours and to go thru all sorts of modifications and then they blame you again when it does not work out.  If you live in a crappy neighborhood I would send my kid to a charter school.  I would never work at one.  Charter schools want to recruit the 22 year old liberal arts major who has no idea what they want to do with their life but they have 60k in loan debt and no idea where they want to go to grad school.  No family No life, but they want to make a difference.  They put them in a charter school and work them like a gov mule for 5 years.  Then they get their student loans paid for by Uncle Sam.

That's not always true.  Charter schools vary widely, in scope, quality, and teaching demands.  Like other public schools, some are fantastic and great to teach at; others not so much. 

I taught at an amazing charter school (after a more traditional career in other pubic schools).  I found I worked less (I had 15 students, not 30), had better support from my administrators (which translated into far less behavior issues), got paid more, and had families that were involved and supportive.  I visited many other charters while in this job, and saw how different each was from others.

Judge the school, not the "charter" status.

[thurston howell iv]

OP:  This is just my .02. I know that you guys are younger and when we (DW and I) were younger we needed to be around the action and out friends and so forth. We did not worry too much about our parents.

Now, as our parents have started getting up in age, (Not terribly old mind you, just lately lots of medical issues and such), we've been wanting to be closer to them. If nothing more than to be able to assist should they need anything.

If you buy a house and build a life too far away from family you will discover that you will want to be closer and it will be a royal PITA to have to uproot and move... 

Besides, I think the idea of middle of nowhere sounds darned pretty good when compared to NYC (Why would anyone want to live there?)

[EJL]

One small point about food being included in the PA option: would you be eating in a cafeteria with the kids? If so, think really carefully about it. I taught for a year in England with that set-up, and not having any control over what or when I ate, and having to take meals in a noisy cafeteria (even though it was a bona fide castle!), was deeply, deeply depressing. I thought I would be fine with it, but I felt like I'd been demoted from adulthood. For the last six weeks of my contract I had a kitchen, and that changed the whole experience for me. So if it were me, I'd want to know that I could make at least simple meals in my own living space.

[charis]

I would be very careful about hitching your wagon to a charter school.

Charter Schools are the devil for the teacher.  They expect you to work all sorts of crazy hours and to go thru all sorts of modifications and then they blame you again when it does not work out.  If you live in a crappy neighborhood I would send my kid to a charter school.  I would never work at one.  Charter schools want to recruit the 22 year old liberal arts major who has no idea what they want to do with their life but they have 60k in loan debt and no idea where they want to go to grad school.  No family No life, but they want to make a difference.  They put them in a charter school and work them like a gov mule for 5 years.  Then they get their student loans paid for by Uncle Sam.

That's not always true.  Charter schools vary widely, in scope, quality, and teaching demands.  Like other public schools, some are fantastic and great to teach at; others not so much. 

I taught at an amazing charter school (after a more traditional career in other pubic schools).  I found I worked less (I had 15 students, not 30), had better support from my administrators (which translated into far less behavior issues), got paid more, and had families that were involved and supportive.  I visited many other charters while in this job, and saw how different each was from others.

Judge the school, not the "charter" status.

My point was more about job security at a charter school, or lack thereof. 

[9ft5wt]

UPDATE - Things happened quickly and job offers began to roll in one right after the other. It came down to the three choices I originally described, except for a somewhat major salary increase regarding the NYC Option.

Instead of $130k combined salary in NYC, we ended up with positions offering $169k combined, plus 9% matches and relocation allowances totaling more than $10k. By maxing our 401k plus the employer match, we'll be able to save $50k pre-tax. I think we'll be able to save quite a bit more than that due to lifestyle choices.

Once we learned about the salary increase, the NYC option became the obvious choice. It was already the likely choice before the salary increase.

Thanks for all of your input and advice!